Dabbling in Data
2020-21 GameStop Short Squeeze: an analysis of the profound impact of social meedia communities on the price of GameStop stock.
Project Overview
Welcome to Dabbling in Data, a project which delves into the GameStop (GME) short squeeze phenomenon. Our primary objective is to shed light on the causation and degree of influence the Reddit community, r/wallstreetbets, had on the stock price of GameStop. We conducted an analysis of GME stock data in relation to r/wallstreetbets posts, over the period December 2020 to March 2021.
Our Motivation
Our project stems from a fascination with this event and its disruption to traditional financial norms, its empowerment of online communities, and its ensuing impact on regulation. Through our analysis, we aim to reveal the role of online communities on stock market behaviour.
Contextualising Our Project
The GameStop short squeeze in early 2021 saw a remarkable surge in the stock price of GameStop (GME). This surge was orchestrated by retail investors, particularly through the Reddit community r/wallstreetbets. As these investors bought GME shares en masse, it forced hedge funds and institutional investors, who had bet against the stock, to cover their positions, causing GME’s price to skyrocket.
Interactive Timeline
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4 January 2021:
First Trading Day of 2021
GME stock closes at $17.25 on the first day of trading in 2021.
At this point around 63% of the company’s outstanding shares are short sold, mainly by major hedge funds and institutional investors.
11 January 2021:
New Leaders Appointed
GME appoints new leaders to its board of directors, which sparks optimism among investors.
22 January 2021:
27 January 2021:
Highest Close
GameStop’s stock price closed at $347.51, its highest close of the squeeze.
The U.S. equity and options trading volume reached its highest-ever single-day level.
Melvin Capital and Citron, two hedge funds that had been shorting GameStop stock, were forced to cover most of their short positions at huge losses.
28 January 2021:
Robinhood Restriction
Robinhood, a popular brokerage app among r/wallstreetbets investors restricted trading GME stock, meaning retail investors could only sell the stock and could no longer buy it.
The subsequent sell off resulted in GME price crashing and triggered suspicions of market manipulation in favour of the institutional investors who were shorting GME.
4 February 2021:
Restrictions Lifted
Trading restrictions on GME are lifted.
19 February 2021:
Post Squeeze Low
GME sinks to a post-squeeze low of $40.59.
24 February 2021:
Congress Hearing
US Congress held a hearing to explore the impact of online communities on financial markets following the events of the Gamestop short squeeze.
10 March 2021:
Post Squeeze High
GME reaches a post-squeeze high of $264.52.
